We examine the association between executive compensation and the interaction between the top-five institutional investor ownership and managerial ownership. We find that top-five institutional investors' ownership is more positively associated with pay-for-performance for small managerial ownership group than large managerial ownership group. We find that top-five institutional investors' ownership is more negatively associated with level of executive compensation for small managerial ownership group than large managerial ownership group. Neither dedicated nor active institutional investors are associated with an additional decrease in the level of executive compensation for large managerial ownership firms. We find that the level of pay is negatively associated with a high level of managerial ownership for the period after 2002. Collectively, the evidence is consistent with the managerial power theory.
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